The buy-to-let market burst into life in the first quarter of the year when lending to landlords jumped despite efforts by the government to bolster loans to first-time buyers.

The Council of Mortgage Lenders said its members gave landlords 33,500 mortgages worth £4.2bn in the first three months of 2013, compared with lending of £3.7bn in the same period of 2012, an increase of £500m.

The proportion of the mortgage market taken by buy-to-let (BTL) deals rose to 13.4% of total outstanding lending, up from 12.9% at the end of the first quarter of 2012 and 13% in the last quarter of last year. The council said there are 1.46m BTL loans in the UK – triple the number that there were a decade ago.

The first quarter's BTL lending figure was slightly lower than the £4.6bn lent in the last quarter of 2012.

The long-term rise in BTL lending, and steep increases in rents, will fuel concerns about the problems first-time buyers encounter in trying to enter the housing market, which the government has tried to relieve with its £80bn funding for lending scheme

In April, property firm LSL, which compiles rental figures, said rents in London hit a record average of £1,106 a month, and rose 4.2% across the UK – double the rate of wage increases.

It found that one in 11 tenants is now in arrears, although it predicted returns for landlords of 10.9% a year.

David Whittaker, managing director of Mortgages for Business, a specialist BTL mortgage broker, said the market was "going great guns" as landlords tried to take advantage of the returns on offer. "The flow of first-time buyers is still barely a trickle, which is sending the excess demand directly into the rental sector and keeping yields high for BTL investors," he said.

He added that remortgage activity was being driven by landlords keen to add to their portfolios. "Rates and fees are down and there are increasing options for landlords looking to finance more complex deals. The funding for lending scheme, too, has helped by loosening the supply of credit to lenders, and they are passing the savings on to investors."

But the government's main scheme to help first-time buyers, called Help to Buy, is beginning to have an impact, said mortgage expert Ray Boulger of John Charcol. "Only two lenders are currently actively supporting the Help to Buy shared equity scheme, but at least two more are set to do so this month. The major builders are reporting strong interest in the scheme."

The CML also produced data showing that repossessions remained near five-year lows with 88,000 properties repossessed in the first quarter, down 17% on a year ago.

The data was published before figures on Friday from the UK's largest network of property surveyors, e.surv, suggested that lenders are also loosening the strings on low-deposit mortgages. It said that lending for house purchases was 6% higher in April, with evidence that at least some of it is going to previously locked-out young buyers.

The report said: "The improvement over the past year has been driven by a significant increase in high loan to value (LTV) lending, with lenders more willing to offer mortgages to borrowers with an 85% LTV or higher.

"Despite house price rises over the last year, there were 11,960 loans on properties worth under £125,000 in April 2013, compared to 11,809 this time last year, suggesting more first-time buyers are getting on the property ladder compared to 12 months ago."

But buyers still face high, and increasing, absolute house price levels. This week Halifax reported that property prices across the country rose by an average of 1.1% in April, which followed rises of 0.5% in February and 0.4% in March. The average figures, though, mask growing regional disparities, with Land Registry data showing that London prices were up 2.5% in March, while prices in Middlesbrough were down 5.1%.